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AG Andrew Cuomo is announcing a $20 million settlement with food service giant Sodexho regarding what officials say was over-charging a number of schools, from western New York to downstate, including the Schenectady school district in the Capital Region. Some SUNY campuses also were shortchanged Cuomo said, when the company failed to pass along savings from supplier discounts.

Here are the details:

Attorney General Andrew M. Cuomo
announced today a $20 million settlement with food services provider
Sodexo for overcharging 21 New York school districts as well as the SUNY
system.

An Attorney General investigation found that the company promised to
provide goods at cost but failed to acknowledge rebates from suppliers,
resulting in illegal overcharges to the schools. The investigation was
sparked by former employees of Sodexo under the New York False Claims
Act, which allows whistleblowers to come forward to disclose wrongdoing
without fear of retribution. The settlement was unsealed in Federal
Court in Massachusetts and is the largest monetary settlement under the
Act that does not involve Medicaid funds.

The 21 schools and the SUNY system contracted with Sodexo to provide
food services, vending and facilities services. An investigation by
Attorney General Cuomo’s Office determined that from September 1, 2004
through August 31, 2009, Sodexo received significant rebates from its
suppliers without acknowledging or passing the savings on to these
schools — in violation of the contracts, as well as state and federal
laws.

“This company cut sweetheart deals with suppliers and then denied
taxpayer-supported schools the benefits,” said Attorney General Cuomo.
“The state and federal regulations regarding such contracts exist to
protect taxpayers, and I thank the whistleblowers for having the courage
to bring this to our attention.”

The 21 K-12 schools participate in the New York State Education
Department’s Child Nutrition Programs and the National School Lunch
Program, which require that rebates, credits and discounts be credited
to the schools. On average, Sodexo received 14 percent rebates from its
suppliers.

Pursuant to the False Claims Act, the settlement funds will be
distributed to the whistleblowers ($3.6 million), New York State ($15
million) and the impacted school districts:

Sodexo must also implement greater transparency in the contracting
process and create built-in safeguards to ensure that clients are
informed about rebates. The company must:

? Disclose in future contracts with public entities that it is
receiving rebates and indicate whether rebates will be retained by
Sodexo or credited to the client
? Provide written disclosure to school district clients for the
next two years that it is receiving off-invoice rebates
? Establish a hotline for clients to call with any questions
concerning rebates
? Pay for an independent auditor’s review of its off-invoice
rebate program for the next three years

Sodexo is among the world’s largest food services companies and the
world’s largest private food purchaser, with more than 313,000
employees serving 6,000 clients.

Attorney General Cuomo’s investigation has revealed that it is common
practice within the food service industry for service providers like
Sodexo to leverage their size and market dominance to obtain rebates
from vendors that supply food products, equipment and supplies. The
investigation continues to examine the rebating practices of other
large, multi-national corporate providers of food service and facilities
management to taxpayer-funded organizations within New York State. The
Attorney General’s Office urges individuals with knowledge of related
conduct to contact the Public Integrity Bureau at 212-416-8090 or
public.integrity@oag.state.ny.us.

The Attorney General’s investigation is being conducted by Assistant
Attorney General John F. Carroll with assistance from Assistant Attorney
General Lauren Popper Ellis, Deputy Bureau Chief of the Public Integrity
Bureau Monica J. Stamm, and David Marsh of the Executive Division.
Special Deputy Attorney General for Public Integrity Ellen N. Biben and
Deputy Attorney General in charge of the Division of Criminal Justice
Thomas P. Higgins are supervising.

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